Do school ties between auditors and client executives influence audit outcomes?

Guan, Yuyan; Su, Lixin; Wu, Donghui; Yang, Zhifeng

doi:10.1016/j.jacceco.2015.09.003

Cited by 291 publications

(170 citation statements)

References 86 publications

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“…When audit fees are used as the dependent variable, we also control for a dummy ( Interim ) to indicate whether the semi‐annual report is audited and another dummy ( MAO ) to indicate the existence of an MAO, as suggested by Guan et al. (). Appendix A presents the detailed definitions of the control variables.…”

Section: Sample Variable Definitions and Descriptive Statisticsmentioning

confidence: 99%

“…Following prior studies (e.g., Guan, Su, Wu, & Zhang, 2016), we consider the natural logarithm of audit fees (Ln(Fee)), with a higher value of Ln(Fee) indicating a higher effort level of the auditor and higher audit quality.…”

Section: Audit Feesmentioning

confidence: 99%

“…We calculate the auditor size (PSize), tenure (Tenure), and relative importance of a client (CI) to an auditor at both the audit firm and individual auditor levels (denoted by subscripts AF and IA, respectively). When audit fees are used as the dependent variable, we also control for a dummy (Interim) to indicate whether the semi-annual report is audited and another dummy (MAO) to indicate the existence of an MAO, as suggested by Guan et al (2016). Appendix A presents the detailed definitions of the control variables.…”

Section: Control Variablesmentioning

confidence: 99%

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Effect of international working experience of individual auditors on audit quality: Evidence from China

Chen

Dai

Kong

et al. 2017

Business Fin & Account

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This paper investigates the effects of auditors with international working experience on audit quality in emerging markets. Such auditors are associated with better audit quality, a pattern that is further supported by an examination based on a propensity score matching sample that controls for endogeneity. Chief financial officers with international experience are more conservative in the client company of their auditors with international working experience.Further, reviewer partners with international working experience provide better audit quality in terms of low accruals, less below-the-line items, and less audit reporting aggressiveness, while engagement partners with international working experience require high audit fees. Moreover, financial reports signed by auditors with international working experience are associated with analyst forecast accuracy and dispersion. Our results are robust to different specifications and alternative measures. Overall, this paper highlights the importance of human capital and provides direct evidence on how auditors with international working experience use their knowledge and audit skills in emerging markets.This article is protected by copyright. All rights reserved.

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Section: Sample Variable Definitions and Descriptive Statisticsmentioning

confidence: 99%

Section: Audit Feesmentioning

confidence: 99%

Section: Control Variablesmentioning

confidence: 99%

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Effect of international working experience of individual auditors on audit quality: Evidence from China

Chen

Dai

Kong

et al. 2017

Business Fin & Account

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“…Guan et al. [] show that audit quality is negatively affected when an auditor and CEO are connected through a mutual university education. In a similar vein, He et al.…”

Section: Hypotheses and Prior Literaturementioning

confidence: 99%

“…Guan et al. [] report that an auditor who is connected to a client's CEO or Chairman through university education is less likely to issue a modified audit opinion. He et al.…”

Section: Hypotheses and Prior Literaturementioning

confidence: 99%

Auditor–Client Compatibility and Audit Firm Selection

Brown¹,

Knechel

2016

J of Accounting Research

125

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We examine auditor switching conditional on the compatibility of clients and their auditors using a unique text‐based measure of similarity of financial disclosures. We find clustering of clients within an audit firm based on this measure. We find that clients with the lowest similarity scores are significantly more likely (9.4%–10.6%) to switch auditors, and will change to an audit firm to which they are more similar. Regarding the effect on audit quality, we find that discretionary accruals are lower when similarity is higher. However, accounting restatements are more likely when text disclosures that are unaudited—business description, and management discussion and analysis (MD&A)—are more similar. We find no such similarity effect for the audited footnotes. Finally, we find that firms that are more similar are less likely to receive a going concern opinion (GCO), but the GCO reporting decision is more accurate. It is unclear if this reflects higher or lower audit quality since firms that are candidates for a GCO are intrinsically different from the average firm in an auditor's portfolio due to their financial distress. One implication of these results is that auditors might have greater involvement in the quality of the text disclosures that are currently not audited.

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CEO foreign experience and corporate sustainable development: Evidence from China

2022

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This study examines the impact of CEO foreign experience on corporate sustainable development from the angle of firm green innovation. Using manually collected data of CEOs' foreign experience, we find that CEO foreign experience is positively associated with firm green innovation in China. The positive relationship between CEO foreign experience and green innovation (including green invention patents and green utility model patents) is more significant when the firm is state owned, when the firm has better corporate governance, and when the firm is subject to a better institutional environment. Further analyses indicate that both foreign work and foreign educational experiences matter; relative to experiences gained in underdeveloped countries, those related to developed economies tend to be more influential in facilitating green innovation. Finally, the documented association is robust to a series of robustness checks, including propensity score matching, instrumental variable approach, Heckman two‐stage model, and the inclusion of firm fixed effects. Overall, this paper contributes to the upper echelons perspective, and it also offers clear practical implications through showing that hiring returnee CEOs can enhance firms' sustainable development, which could be of interest to policy makers in other emerging markets.

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Do school ties between auditors and client executives influence audit outcomes?

Cited by 291 publications

References 86 publications

Effect of international working experience of individual auditors on audit quality: Evidence from China

Effect of international working experience of individual auditors on audit quality: Evidence from China

Auditor–Client Compatibility and Audit Firm Selection

CEO foreign experience and corporate sustainable development: Evidence from China

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